Blowing a hole in urban operating budgets

Published February 13. 2013 12:01AM

Perhaps we have not heard more howling from mayors and first selectmen about the changes in municipal aid that Gov. Dannel P. Malloy is recommending in his two-year budget proposal because they have been too busy with snow removal.

But the complaints will come, and justifiably so. Because while Gov. Malloy contends his budget, if enacted, would maintain state aid to towns in cities, in reality it would be a fiscal disaster for many, transferring a greater property tax burden to owners of homes and businesses, while cutting aid for general government operating expenses - police, fire, public works - by about $86 million.

New London, already in fiscal crisis, could expect to lose $2 million in state aid for city operations, according to the Connecticut Conference of Municipalities (CCM).

Start with the proposal to exempt from property taxation the first $20,000 of a motor vehicle's assessed (70 percent) value. That may seem like great news if you own an average car because you won't be paying any property taxes on it. But the CCM estimates that it would result in annual revenue losses of between $550 million and $600 million for towns and cities.

The car tax is unfair and there are good reasons to end or repair it. Residents in different communities pay vastly different taxes on the same vehicles. The system encourages some to register motor vehicles in other lower-tax communities or even out of state. And municipalities spend an inordinate amount of administrative resources tracking down these taxes.

But the solution cannot be simply eliminating it, leaving towns and cities to deal with the revenue loss. That would mean higher real estate taxes, often along with service cuts. Better choices would be to phase out of the tax, with some help to replace loss revenues, or make the state responsible for collecting the tax, equalizing it from town to town and returning revenues to municipalities.

In another move that would hit cities and towns with state land and buildings particularly hard, Gov. Malloy proposes in the next fiscal year eliminating the $73.6 million in state payments municipalities receive to make up for revenues lost when nontaxable state-owned properties are located in their communities. The governor proposes shifting that money to public education through ECS (Education Cost Sharing) grants.

In essence, Gov. Malloy seeks to force his priority - more spending on public education - on municipalities. Communities could use this PILOT-backed ECS aid on other, non-education services, but this would exacerbate the often deep divide that pits school systems against general services in the fight over limited dollars. The legislature should carefully examine this proposed transfer of PILOT money.

Other hits would include cutting state funding for school transportation from $24.8 million to $5 million in competitive grant money, available only to districts with regional transportation plans that save money.

Money to towns and cities coming from the Mashantucket Pequot and Mohegan Fund - slot revenues -would drop from $61.8 million to $5.4 million, distributed largely to towns here in southeastern Connecticut that deal with the impact of the nearby casinos; good, we suppose, for this area.

Gov. Malloy proposes making up for these losses with a $50.8 million increase in ECS grants, which would be in addition to the transferred PILOT money. (Yes, it's complicated by design).

The governor would also double grants for town road work from $30 million to $60 million, and increase from $30 million to $86.4 million funding under the Local Capital Improvement Program (LOCIP), which reimburses municipalities for money spent on eligible infrastructure work - money the state will bond. None of this aid, however, would make up for the operating money municipalities would lose in other areas. You can't use infrastructure money to pay a cop or snowplow driver.

To balance the budget the state may well have to reduce some municipal aid. That is essentially what the governor is proposing, as much as he tries to wrap it in a bow and call it break even.

A more candid discussion needs to take place in the legislature and municipal leaders will weigh in - after they finish with the snow.